The South African rand kept its gains today after the South African Reserve Bank left its main interest rate unchanged at yesterday’s monetary policy meeting to support recovery of the nation’s economy.
South Africa’s central bank maintained its key repurchase rate unchanged at 5.5 percent, a move expected by market analysts. The main lending rate is at 30-year low. Gill Marcus, Bank’s Governor, said that the current monetary policy “is accommodative and supportive of the real economy”. Positive developments in the global economy reduced need for an interest rate cut, but investors think that an interest rate hike also isn’t likely to happen in the near future.
High lending rates help to attract to South Africa investors interested in so-called carry trades. Such investors borrow in countries with low interest rates (like the United States and Japan) and invest in currencies with high yield. Bloomberg economists estimated that the South African currency has returned 2.6 percent this year in such trades.
USD/ZAR traded at 7.9060 as of 7:01 GMT today after it dropped from 7.9320 to 7.9070 yesterday.
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